CALGARY, ALBERTA -- (Marketwired) -- 11/03/15 -- Veresen Inc. ("Veresen" or the "Company") (TSX: VSN) announced today financial and operating results for the three and nine months ended September 30, 2015.
Q3 Highlights
-- Distributable cash (2) of $71.7 million ($0.25 per Common Share)
compared to $54.9 million ($0.25 per Common Share) in the third quarter
of 2014.
-- Adjusted net income attributable to Common Shares (1)of $11.7 million
($0.04 per Common Share) compared to an adjusted net loss attributable
to Common Shares of $5.2 million ($0.02 per Common Share) in the third
quarter of 2014.
-- Net income attributable to Common Shares of $7.6 million ($0.03 per
Common Share) compared to net income of $2.5 million ($0.01 per Common
Share) in the third quarter of 2014.
-- Cash from operating activities of $77.3 million compared to $50.0
million in the third quarter of 2014.
-- On September 30, 2015, Veresen achieved a significant milestone related
to its liquefied natural gas ("LNG") development project when the
Federal Energy Regulatory Commission ("FERC") in the United States
issued a final Environmental Impact Statement ("EIS") for Jordan Cove
LNG and Pacific Connector Gas Pipeline ("Pacific Connector").
-- Veresen Midstream Limited Partnership ("Veresen Midstream") received
notice that the Cutbank Ridge Partnership ("CRP") sanctioned the 400
million cubic feet per day ("mmcf/d") Sunrise gas plant to be located in
the Montney region near Dawson Creek in northeastern British Columbia.
"Veresen's take-or-pay and fixed fee businesses delivered solid third quarter results against challenging market dynamics," said Don Althoff, President and CEO of Veresen. "Veresen's portfolio of contracted assets provides stability during this period of commodity price volatility and supports our dividend policy."
Financial Performance
Adjusted Net Income
attributable to Common Three months ended Nine months ended
Shares September 30 September 30
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($ Millions, except per
Common Share amounts) 2015 2014 2015 2014
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Adjusted net income
before tax (1)
Pipeline 64.9 30.6 188.9 92.1
Midstream (7.9) 17.9 7.0 60.5
Power (0.1) - 4.0 5.5
Veresen - Corporate
and Project
Development (35.3) (48.1) (113.7) (117.4)
Tax recovery (expense) (3.3) (1.5) (19.1) (11.8)
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Adjusted net income
(loss) 18.3 (1.1) 67.1 28.9
Preferred Share
dividends (6.6) (4.1) (17.2) (12.3)
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Adjusted net income
(loss) attributable to
Common Shares 11.7 (5.2) 49.9 16.6
Per Common Share ($) 0.04 (0.02) 0.17 0.08
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(1) See the reconciliation of adjusted net income attributable to Common
Shares to net income attributed to Common Shares in the tables attached
to this news release.
Veresen reports adjusted net income attributable to Common Shares to enhance the comparability of its earnings. Adjusted net income represents net income adjusted for specific significant items which do not reflect the Company's underlying operations.
For the quarter ended September 30, 2015, Veresen generated adjusted net income attributable to Common Shares of $11.7 million or $0.04 per Common Share compared to an adjusted net loss of $5.2 million or $0.02 per Common Share for 2014. Earnings reflect increases in Veresen's Pipeline business, and lower earnings from Veresen's Midstream business, relative to the same period last year. Veresen's 50% interest in the Ruby Pipeline contributed an incremental $30.1 million, while Alliance also contributed higher adjusted earnings.
In the third quarter of 2015, adjusted earnings from the Midstream segment decreased compared to the same period last year, reflecting low natural gas liquids margins as a result of low propane prices, and the sale of 50% of Veresen's Hythe/Steeprock midstream business through the Veresen Midstream transaction.
The decrease in Corporate costs in the third quarter of 2015 is attributable to the revaluation of Veresen's long-term incentive plans and lower development spending related to Jordan Cove LNG.
Net Income attributable Three months ended Nine months ended to Common Shares September 30 September 30 ---------------------------------------------------------------------------- ($ Millions, except per Common Share amounts) 2015 2014 2015 2014 ---------------------------------------------------------------------------- Net income (loss) before tax Pipeline 64.9 30.6 188.9 92.1 Midstream (8.2) 17.9 (14.4) 60.5 Power (5.8) (0.8) (2.4) 0.9 Veresen - Corporate and Project Development (35.3) (43.2) (113.7) (112.5) Gain on sale of assets - - 37.2 14.3 Tax recovery (expense) (1.4) (0.1) (22.5) (11.5) ---------------------------------------------------------------------------- Net income from continuing operations 14.2 4.4 73.1 43.8 Net income (loss) from discontinued operations - 2.2 - (0.1) ---------------------------------------------------------------------------- Net income, before extraordinary loss 14.2 6.6 73.1 43.7 Extraordinary loss, net of tax - - (10.3) - ---------------------------------------------------------------------------- Net income 14.2 6.6 62.8 43.7 Preferred Share dividends (6.6) (4.1) (17.2) (12.3) ---------------------------------------------------------------------------- Net income attributable to Common Shares 7.6 2.5 45.6 31.4 Per Common Share ($) 0.03 0.01 0.16 0.15 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
For the three months ended September 30, 2015, Veresen generated net income attributable to Common Shares of $7.6 million or $0.03 per Common Share compared to net income of $2.5 million or $0.01 per Common Share for the same period last year.
Veresen and its jointly-controlled businesses periodically enter into interest rate hedges to manage interest rate exposures. In the third quarter of 2015, results from Veresen's Power business include the impact of the revaluation of interest rate hedges resulting in a pre-tax loss of $5.7 million compared to a pre-tax loss of $0.8 million in the same period last year.
Three months ended Nine months ended
Distributable Cash (2) September 30 September 30
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($ Millions, except per
Common Share amounts) 2015 2014 2015 2014
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Pipeline 78.7 40.7 219.7 122.3
Midstream 12.4 27.1 57.2 96.8
Power 9.7 14.8 29.0 39.7
Veresen - Corporate (10.2) (15.9) (44.5) (47.9)
Current tax (12.3) (7.7) (26.3) (14.4)
Preferred Share
dividends (6.6) (4.1) (17.2) (12.3)
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Distributable Cash 71.7 54.9 217.9 184.2
Per Common Share ($) 0.25 0.25 0.75 0.86
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(2) See the reconciliation of distributable cash to cash from operating
activities in the tables attached to this news release.
In the third quarter of 2015, Veresen generated distributable cash of $71.7 million or $0.25 per Common Share compared to $54.9 million or $0.25 Common Share for the same period in 2014. Increased cash flows generated by Veresen's Pipeline businesses were partially offset by reduced cash flows from the Aux Sable Midstream business and the Power business.
Third quarter Pipeline distributable cash includes $30.1 million in preferred interest dividends from the Ruby pipeline. Alliance generated an additional $7.9 million in the third quarter of 2015, largely driven by the effects of a weaker Canadian dollar and the discontinuance of rate regulated accounting.
Distributions from Aux Sable decreased by $10.7 million due to the effect of weaker NGL market conditions during the quarter. The effect of the Veresen Midstream transaction was neutral to distributable cash, as the reduced contribution from Hythe/Steeprock, resulting from the change in ownership, was offset by reduced Corporate administration and interest costs.
Lower distributable cash from Veresen's Power business during the third quarter of 2015 was due to the sale of the Company's U.S. gas-fired cogeneration facilities in the first quarter of 2015, partially offset by incremental earnings from the Dasque-Middle run-of-river hydro and St. Columban wind facilities, which commenced operations in May and July 2015, respectively.
Current tax is higher in the third quarter of 2015 due to higher U.S. pipeline earnings and the impact of a weaker Canadian dollar on U.S.-based taxes. The issuance of Series E Preferred Shares in the second quarter of 2015 resulted in higher Preferred Share dividends in the third quarter of 2015.
Business Segment Highlights
Alliance
Following the National Energy Board's approval of Alliance's new services and associated terms and conditions in the second quarter of 2015, in October 2015, Alliance held an open season for both winter 2015/2016 and summer 2016 Seasonal Service under its New Services Offering. The open season was very successful. Interest far exceeded the 30 mmcf/d of offered capacity. The bid floor was set at 125% of the firm five year toll and Alliance received bids for tolls that exceeded the bid floor. As such, Veresen believes any additional capacity that may be offered on an interruptible basis will have strong interest.
On August 7, 2015, Alliance shut down its mainline pipeline system following the detection of hydrogen sulphide ("H2S") that entered the system as a result of complications experienced by an upstream operator. Alliance successfully completed flaring operations to remove natural gas containing H2S from its system, and safely resumed operations and natural gas transportation service on August 13, 2015. The financial impact of the shutdown was not material to the Company. Alliance is pursuing avenues for the recovery of the costs associated with this incident.
Midstream
Veresen Midstream On October 6, 2015, Veresen announced that CRP, a partnership between Encana Corporation and Cutbank Dawson Gas Resources Ltd., a subsidiary of Mitsubishi Corporation, sanctioned the 400 mmcf/d Sunrise gas plant, to be located in the Montney region near Dawson Creek in northeastern British Columbia. The estimated capital cost for the project (plant and ancillary facilities) is $860 million.
Veresen Midstream anticipates that CRP will proceed to a final investment decision for the 200 mmcf/d Tower gas plant in late 2015. CRP has also proposed to add an incremental 200 mmcf/d of compression and 400 mmcf/d of refrigeration capacity to the Saturn compressor site, effectively converting this site into a 400 mmcf/d gas plant. A final investment decision for this project could also be made in late 2015 or early 2016. To date, Veresen has invested $130 million in these two projects. In addition to the assets acquired on March 31, 2015, these projects represent an agreement $3 billion in capital investment for Veresen Midstream.
With the start-up of the Saturn compressor station in mid-2015, Veresen Midstream's annual run-rate EBITDA from currently operating assets is expected to be between $145 million and $155 million.
Aux Sable Veresen's Aux Sable Midstream business operations continued to be challenged by an oversupplied NGL market. United States Gulf Coast propane plus margins remained persistently weak in the third quarter of 2015 as supply growth from liquids-rich shale gas production continues to exceed new demand.
Power
Veresen's Power business performed reliably during the third quarter of 2015; however, lower water flows at the Company's run-of-river hydro facilities, driven by dry weather conditions, impacted overall output compared to the same period in 2014.
The 33 MW St. Columban wind farm commenced full operations in July 2015.
Construction of the 40 MW Grand Valley Phase III wind project (75% interest) is underway and expected to be in-service in late 2015.
Jordan Cove LNG Development Project
On September 30, 2015, the FERC issued a final EIS for Jordan Cove LNG and Pacific Connector. Jordan Cove LNG and Pacific Connector formally filed applications with the FERC for approval to construct a LNG export terminal at Coos Bay, Oregon and a 232-mile natural gas pipeline from Malin, Oregon to the LNG terminal in May and June 2013, respectively.
Receipt of the final EIS is a significant regulatory milestone for Veresen. Veresen worked closely with federal, state and local regulatory agencies and with local communities over the past three years, and undertook significant due diligence to ensure that the terminal and pipeline are designed to meet or exceed all of the required environmental standards.
FERC's Notice of Schedule, issued in June 2015, provides for the issuance of a final order and certificates for Jordan Cove LNG and Pacific Connector on or before December 29, 2015. Veresen expects to obtain a FERC "Notice to Proceed" in mid-2016, leading to a final investment decision thereafter.
On the commercial front, negotiations currently underway with potential customers are advancing as expected and will extend through to the end of 2015 and possibly into early 2016. Jordan Cove LNG is a highly-attractive gas-linked project, situated on the west coast of North America, offering a competitive tolling structure and the opportunity for customers to source a diverse and secure natural gas supply. Accordingly, Veresen believes that Jordan Cove LNG will secure buyers for its 6 million tons per year of capacity (approximately 1 billion cubic feet per day) for delivery in the 2020/2021 timeframe.
Veresen continues to optimize project costs and schedule, and value engineering opportunities, leveraging the lower oil price environment and slowdown in global energy projects. This process will continue into the first half of 2016.
2015 Guidance Updated
Veresen updated its 2015 distributable cash to be in the range of $0.99 to $1.07 per Common Share, compared to the previously published range of $0.95 to $1.14 per Common Share. The increase in the low end of the range reflects financial results to the end of the third quarter, lower Corporate costs and the effect of the weaker Canadian dollar. The Company expects fractionation margins at Aux Sable to continue to be weak in the fourth quarter of the year and this is reflected in the reduction to the high end of the guidance range. Further details regarding Veresen's 2015 guidance can be found on the home page of the Company's web site at www.vereseninc.com.
Conference Call and Webcast
Veresen will host a conference call and webcast on November 4, 2015 at 7 am MT (9 am ET) to discuss its results.
Dial-in: 1 (877) 291-4570 or 1 (647) 788-4919 Conference ID 65703332
The link to the conference call webcast is available on Veresen's website.
A replay of the call will be available at approximately 10 am MT (12 pm ET) on November 4, 2015 by dialing 1-800-585-8367 and 1-416-6214642. The access code is 65703332, followed by the pound sign. The replay will expire at midnight (ET) on November 21, 2015.
MD&A, Financial Statements and Notes
Management's Discussion and Analysis ("MD&A") and consolidated financial statements provide a detailed explanation of Veresen's financial results for the three and nine months ended September 30, 2015 compared to the same periods last year and should be read in conjunction with this news release. These documents are available at www.vereseninc.com and at www.sedar.com.
About Veresen Inc.
Veresen is a publicly-traded dividend paying corporation based in Calgary, Alberta that owns and operates energy infrastructure assets across North America. Veresen is engaged in three principal businesses: a pipeline transportation business comprised of interests in the Alliance Pipeline, the Ruby Pipeline and the Alberta Ethane Gathering System; a midstream business which includes, an ownership interest in Aux Sable, a world-class natural gas liquids (NGL) extraction facility near Chicago, and other natural gas and NGL processing energy infrastructure, and a partnership interest in Veresen Midstream Limited Partnership which owns assets in western Canada; and a power business comprised of a portfolio of assets in Canada. Veresen is also developing Jordan Cove LNG, a six million tonne per annum natural gas liquefaction facility proposed to be constructed in Coos Bay, Oregon, and the Pacific Connector Gas Pipeline. In the normal course of business, Veresen regularly evaluates and pursues acquisition and development opportunities.
Veresen's Common Shares, Cumulative Redeemable Preferred Shares, Series A, Series C and Series E trade on the Toronto Stock Exchange under the symbols "VSN", "VSN.PR.A", "VSN.PR.C" and "VSN.PR.E", respectively. For further information, please visit www.vereseninc.com.
Forward-Looking Information
Certain information contained herein relating to, but not limited to, Veresen and its businesses constitutes forward-looking information under applicable securities laws. All statements, other than statements of historical fact, which address activities, events or developments that Veresen expects or anticipates may or will occur in the future, are forward-looking information. Forward-looking information typically contains statements with words such as "may", "estimate", "anticipate", "believe", "expect", "plan", "intend", "target", "project", "forecast" or similar words suggesting future outcomes or outlook. Forward-looking statements in this news release include, but are not limited to, statements with respect to: the ability of Alliance to implement, and the financial impact of, new service offerings; the financial impact of the shutdown of the Alliance Pipeline in August 2015; the cost and in-service date of the Burstall NGL storage facility; the cost, timing of the approval and construction of new Veresen Midstream facilities; the earnings of Veresen Midstream; the timing of the commercial service of the Grand Valley Phase III wind project; the timing for regulatory approvals and final investment decision for Jordan Cove LNG and Pacific Connector Gas Pipeline; Veresen's ability to negotiate long term service agreements with off-take customers for LNG; Veresen's ability to realize its growth objectives; the availability of financing for current capital projects and new investment opportunities; and the ability of each of its businesses to generate distributable cash in 2015.
The risks and uncertainties that may affect the operations, performance, development and results of Veresen's businesses include, but are not limited to, the following factors: the ability of Veresen to successfully implement its strategic initiatives and achieve expected benefits; levels of oil and gas exploration and development activity; the status, credit risk and continued existence of contracted customers; the availability and price of capital; the availability and price of energy commodities; the availability of construction services and materials; fluctuations in foreign exchange and interest rates; Veresen's ability to successfully obtain regulatory approvals; changes in tax, regulatory, environmental, and other laws and regulations; competitive factors in the pipeline, midstream and power industries; operational breakdowns, failures, or other disruptions; and the prevailing economic conditions in North America. Additional information on these and other risks, uncertainties and factors that could affect Veresen's operations or financial results are included in its filings with the securities commissions or similar authorities in each of the provinces of Canada, as may be updated from time to time. Readers are also cautioned that the foregoing list of factors and risks is not exhaustive. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these factors are independent and management's future course of action would depend on its assessment of all information at that time. Although Veresen believes that the expectations conveyed by the forward-looking information are reasonable based on information available on the date of preparation, no assurances can be given as to future results, levels of activity and achievements. Undue reliance should not be placed on the information contained herein, as actual result achieved will vary from the information provided herein and the variations may be material. Veresen makes no representation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information. Furthermore, the forward-looking statements contained herein are made as of the date hereof, and Veresen does not undertake any obligation to update publicly or to revise any forward-looking information, whether as a result of new information, future events or otherwise. Any forward-looking information contained herein is expressly qualified by this cautionary statement.
Certain financial information contained in this news release may not be standard measures under Generally Accepted Accounting Principles ("GAAP") in the United States and may not be comparable to similar measures presented by other entities. These measures are considered to be important measures used by the investment community and should be used to supplement other performance measures prepared in accordance with GAAP in the United States. For further information on non-GAAP financial measures used by Veresen see Management's Discussion and Analysis, in particular, the section entitled "Non-GAAP Financial Measures" contained in the annual Management Discussion and Analysis, filed by Veresen with Canadian securities regulators.
Veresen Inc.
Consolidated Statement of Financial Position
(Canadian $ Millions; number of shares in September 30, December 31,
Millions; unaudited) 2015 2014
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Assets
Current assets
Cash and short-term investments 107.7 51.4
Restricted cash 6.8 4.9
Distributions receivable 45.2 45.6
Receivables 30.3 55.7
Other 14.7 12.6
Assets held for sale - 38.9
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204.7 209.1
Investments in jointly-controlled businesses 1,333.0 885.2
Investments held at cost 1,917.2 1,660.2
Rate-regulated asset - 24.1
Pipeline, plant and other capital assets 922.7 1,503.8
Intangible assets 147.4 392.7
Other assets 57.1 62.4
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4,582.1 4,737.5
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Liabilities
Current liabilities
Payables 69.7 70.7
Deferred revenue 2.1 2.3
Dividends payable 24.8 8.0
Operating loan from jointly-controlled
businesses 6.0 -
Current portion of long-term senior debt 12.1 11.5
Liabilities associated with assets held for
sale - 3.6
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114.7 96.1
Long-term senior debt 1,149.0 1,799.9
Deferred tax liabilities 261.7 256.0
Other long-term liabilities 40.7 52.8
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1,566.1 2,204.8
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Shareholders' Equity
Share capital
Preferred shares 536.7 341.4
Common shares (294.4 and 285.0 outstanding
at September 30, 2015 and December 31,
2014, respectively) 3,307.9 3,185.5
Additional paid-in capital 4.3 4.3
Cumulative other comprehensive income (loss) 273.2 (64.6)
Accumulated deficit (1,106.1) (933.9)
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3,016.0 2,532.7
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4,582.1 4,737.5
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Veresen Inc.
Consolidated Statement of Income
Three months ended Nine months ended
September 30 September 30
(Canadian $ Millions, except per
Common Share amounts; unaudited) 2015 2014 2015 2014
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Equity income 15.4 33.8 57.3 113.1
Dividend income 30.1 - 85.8 -
Operating revenues 37.5 67.8 147.0 234.1
Operations and maintenance (15.0) (29.4) (60.2) (113.3)
General and administrative (6.6) (11.9) (33.0) (36.5)
Project development (19.9) (28.6) (56.6) (58.8)
Depreciation and amortization (13.7) (20.7) (45.8) (62.6)
Interest and other finance (14.9) (12.5) (42.0) (41.3)
Foreign exchange and other 2.7 6.0 5.9 6.3
Gain on sale of assets - - 37.2 14.3
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Net income before tax 15.6 4.5 95.6 55.3
Current tax (9.1) (9.3) (30.6) (19.2)
Deferred tax 7.7 9.2 8.1 7.7
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Net income from continuing
operations 14.2 4.4 73.1 43.8
Discontinued operations
Net income (loss) from
discontinued operations before
tax - 3.6 - (0.1)
Income tax on discontinued
operations - (1.4) - -
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Discontinued operations income
(loss) - 2.2 - (0.1)
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Net income, before extraordinary
loss 14.2 6.6 73.1 43.7
Extraordinary loss, net of tax - - (10.3) -
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Net income 14.2 6.6 62.8 43.7
Preferred Share dividends (6.6) (4.1) (17.2) (12.3)
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Net income attributable to Common
Shares 7.6 2.5 45.6 31.4
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Net income per Common Share, basic
and diluted
Continuing operations 0.03 - 0.20 0.15
Discontinued operations - 0.01 - -
Extraordinary loss - - (0.04) -
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0.03 0.01 0.16 0.15
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Consolidated Statement of Comprehensive Income
Three months ended Nine months ended
September 30 September 30
(Canadian $ Millions; unaudited) 2015 2014 2015 2014
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Net income 14.2 6.6 62.8 43.7
Other comprehensive income
Unrealized foreign exchange gain
on translation 176.1 24.1 337.8 26.7
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Other comprehensive income 176.1 24.1 337.8 26.7
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Comprehensive income 190.3 30.7 400.6 70.4
Preferred Share dividends (6.6) (4.1) (17.2) (12.3)
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Comprehensive income attributable to
Common Shares 183.7 26.6 383.4 58.1
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Veresen Inc.
Consolidated Statement of Cash Flows
Three months ended Nine months ended
September 30 September 30
(Canadian $ Millions;
unaudited) 2015 2014 2015 2014
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Operating
Net income 14.2 6.6 62.8 43.7
Net income (loss) from
discontinued operations - (3.6) - 0.1
Equity income (15.4) (33.8) (57.3) (113.1)
Distributions from
jointly-controlled
businesses 67.7 50.9 168.4 168.0
Depreciation and
amortization 13.7 20.7 45.8 62.6
Foreign exchange and other
non-cash items 3.1 (5.6) 12.2 (2.4)
Deferred tax (7.7) (9.2) (8.1) (7.7)
Gain on sale of assets - - (37.2) (14.3)
Extraordinary loss, net of
tax - - 10.3 -
Changes in non-cash
working capital 1.7 16.5 14.4 2.0
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Cash provided by
continuing operations 77.3 42.5 211.3 138.9
Cash provided by
discontinued operations - 7.5 - 4.5
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77.3 50.0 211.3 143.4
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Investing
Proceeds from sale of
assets - - 420.0 18.7
Investments in jointly-
controlled businesses (13.0) (6.5) (40.2) (19.2)
Return of capital from
jointly-controlled
businesses 0.7 - 25.7 11.2
Pipeline, plant and other
capital assets (17.2) (31.1) (48.9) (108.6)
Other 0.8 (1.1) (1.1) (3.7)
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Cash provided (used) by
continuing operations (28.7) (38.7) 355.5 (101.6)
Cash provided (used) in
discontinued operations - (0.3) 34.0 (3.3)
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(28.7) (39.0) 389.5 (104.9)
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Financing
Long-term debt issued, net
of issue costs - - - 198.7
Long-term debt repaid (113.5) (201.8) (733.7) (258.1)
Net change in credit
facilities, net of issue
costs 83.2 41.4 82.2 (121.1)
Common shares issued, net
of issue costs - - - 272.9
Preferred Shares issued,
net of issue costs - - 193.9 -
Common Share dividends
paid (27.4) (40.9) (78.5) (121.0)
Preferred Share dividends
paid (6.6) (4.1) (17.2) (12.3)
Repayments from (advances
to) jointly-controlled
businesses 23.7 - (0.1) -
Other - 0.4 - 2.5
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(40.6) (205.0) (553.4) (38.4)
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Increase (decrease) in cash
and short-term investments 8.0 (194.0) 47.4 0.1
Effect of foreign exchange
rate changes on cash and
short-term investments 6.3 0.3 8.9 (0.4)
Cash and short-term
investments at the
beginning of the period 93.4 218.6 51.4 25.2
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Cash and short-term
investments at the end of
the period 107.7 24.9 107.7 24.9
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Veresen Inc.
Distributable Cash
Three months ended Nine months ended
September 30 September 30
(Canadian $ Millions, except per
Common Share amounts; unaudited) 2015 2014 2015 2014
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Pipeline 78.7 40.7 219.7 122.3
Midstream 12.4 27.1 57.2 96.8
Power 9.7 14.8 29.0 39.7
Veresen-Corporate (10.2) (15.9) (44.5) (47.9)
Current tax (12.3) (7.7) (26.3) (14.4)
Preferred Share dividends (6.6) (4.1) (17.2) (12.3)
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Distributable cash (1) 71.7 54.9 217.9 184.2
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Distributable cash per Common Share
($) (2) 0.25 0.25 0.75 0.86
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Dividends paid/payable (3) 73.6 55.4 217.8 160.8
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Dividends paid/payable per Common
Share ($) 0.25 0.25 0.75 0.75
(1) Distributable cash is not a standard measure under generally accepted
accounting principles in the United States and may not be comparable
to similar measures presented by other entities. Distributable cash
represents the cash available to Veresen for distribution to common
shareholders after providing for debt service obligations, Preferred
Share dividends, and any maintenance and sustaining capital
expenditures. Distributable cash does not include distribution
reserves, if any, available in jointly-controlled businesses, project
development costs, or transaction costs incurred in conjunction with
acquisitions. Project development costs are discretionary, non-
recoverable costs incurred to assess the commercial viability of
greenfield business initiatives unrelated to the Company's operating
businesses. The Company considers transaction costs to be part of the
consideration paid for an acquired business and, as such, are
unrelated to the Company's operating businesses. Distributable cash is
an important measure used by the investment community to assess the
source and sustainability of Veresen's cash distributions and should
be used to supplement other performance measures prepared in
accordance with generally accepted accounting principles in the United
States. See the following table for the reconciliation of
distributable cash to cash from operating activities.
(2) The number of Common Shares used to calculate distributable cash per
Common Share is based on the average number of Common Shares
outstanding at each record date. For the three months ended September
30, 2015, the average number of Common Shares outstanding for this
calculation was 293,175,695 (2014 - 221,672,715 and 226,718,492) on a
basic and diluted basis, respectively. For the nine months ended
September 30, 2015 the average number of Common Shares outstanding for
this calculation was 290,113,052 (2014 - 214,566,437 and 220,169,699)
on a basic and diluted basis, respectively.
(3) Includes $45.4 million and $137.7 million of dividends for the three
and nine months ended September 30, 2015, respectively (2014 - $13.9
million and $38.8 million) satisfied through the issuance of Common
Shares under the Company's Premium Dividend™ (trademark of
Canaccord Genuity Corp.) and Dividend Reinvestment Plan.
Veresen Inc.
Reconciliation of Distributable Cash to Cash from Operating Activities
Three months ended Nine months ended
September 30 September 30
(Canadian $ Millions; unaudited) 2015 2014 2015 2014
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Cash from operating activities 77.3 50.0 211.3 143.4
Add (deduct):
Project development costs (4) 19.9 28.5 56.6 58.8
Change in non-cash working capital
and other (7.5) (13.1) (22.0) 11.1
Loan of operating cash flow from
jointly-controlled business(5) 3.0 - 6.0 -
Principal repayments on senior
notes (2.9) (2.7) (8.5) (8.6)
Maintenance capital expenditures (0.7) (0.9) (2.1) (4.7)
Distributions earned less than
distributions received (6) (10.8) (2.8) (6.2) (3.5)
Preferred Share dividends (6.6) (4.1) (17.2) (12.3)
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Distributable cash 71.7 54.9 217.9 184.2
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(4) Represents costs incurred by us in relation to projects where the
recoverability of such costs has not yet been established. Amounts
incurred for the three and nine months ended September 30, 2015 relate
primarily to the Jordan Cove LNG terminal project, the Pacific
Connector Gas Pipeline project, and various other development
projects.
(5) We have been provided a loan by the York Energy Centre, a jointly-
controlled business. The loan is non-interest bearing and is due on
demand. As at September 30, 2015, the balance outstanding is $6.0
million. The loan is intended to provide us with operating cash flows
from the York Energy Centre in a more tax efficient manner.
(6) Represents the difference between distributions declared by jointly-
controlled businesses and distributions received.
Reconciliation of Net Income to Adjusted Net Income Attributable to Common
Shares
Three months ended Nine months ended
September 30 September 30
(Canadian $ Millions; unaudited) 2015 2014 2015 2014
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Adjusted net income (loss)
attributable to Common Shares 11.7 (5.2) 49.9 16.6
Extraordinary loss, net of tax (7) - - (10.3) -
Midstream - gain on sale of assets
(8) - - 37.2 -
Midstream - loss on revaluation of
Veresen Midstream debt (9) (26.2) - (25.5) -
Midstream - gain on Veresen
Midstream cross currency swap
(10) 25.9 - 21.3 -
Midstream - write-down of deferred
financing costs (11) - - (1.5) -
Midstream - potential customer
settlement (12) - - (15.7) -
Power - gain (loss) from
discontinued operations before
tax (13) - 3.6 - (0.1)
Power - unrealized gain/(loss) on
interest rate hedge (14) (5.7) (0.8) (6.4) (8.5)
Power - one time York OPA
settlement (15) - - - 3.9
Corporate - gain on sale of assets
(16) - - - 14.3
Corporate - gain on forward
foreign exchange contracts - 4.9 - 4.9
Taxes (17) 1.6 - (0.1) 0.3
Effect of Alberta corporate tax
rate increase (18) 0.3 - (3.3) -
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Net income attributable to Common
Shares 7.6 2.5 45.6 31.4
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Net income attributable to Common Shares includes the following items which
are non-operating in nature and/or unusual items and which we do not expect
to recur:
(7) Loss due to the de-recognition of regulatory assets and liabilities
related to Alliance.
(8) Gain on the sale of the Hythe/Steeprock assets to Veresen Midstream on
March 31, 2015.
(9) Loss on the revaluation of US dollar-denominated Term Loan B held by
Veresen Midstream.
(10) Gain on the Veresen Midstream cross currency swap entered into to
hedge the impact of changes in foreign exchange and interest rates on
the Term Loan B held by Veresen Midstream.
(11) Adjustment to deferred financing costs related to fees incurred on a
modification to Veresen Midstream's debt.
(12) Provision recognized in the second quarter of 2015 in respect of
potential adjustments relating to Aux Sable customer obligations.
(13) Results relating to U.S. gas-fired assets that were sold January 8,
2015.
(14) Loss on revaluation of interest rate hedge held by York Energy Centre
and Grand Valley Wind Farms.
(15) Retroactive adjustment received in relation to York Energy Center's
purchase agreement with the OPA.
(16) Gains on the sale of the Culliton Creek run-of-river development
project and our 50% interest in Alton Gas Storage.
(17) The related taxes on the adjusting items described above.
(18) Impact of increased corporate income tax rates in the province of
Alberta.
Contacts:
Veresen Inc.
Dorreen Miller, Director, Investor Relations
(403) 213-3633
investor-relations@vereseninc.com
www.vereseninc.com
